Retirement / semi-retirement plans

[bumfuzzled93]

I have been working for about 2 years now since uni graduation. 

 

I am curious if the older guys here do retire/ semi-retire at a rather early age (<50) since there is no burden of caring for kids.
Also, I am wondering under what conditions are people comfortable retiring? E.g. Fully paid for HDB, 500k in investments/savings, or 50k per year in passive income?

[upshot]

No formula. More about your expectation. For me I am one step retirement mode, but I like work for work sake. It serves to keep me linked to mainstream society. One mush have purpose for life. It is your one and only time. No proof even in 2021 can show you of any after life. But right now with what you see before you and thru the internet age, the human race is likely a fluke of nature or whatever you want to call it. But you are HERE. What can or can not happen aside, what do you want to do with your time here?

 

If you can answer that question of self purpose and determine how you want to live, value yourself and valued by society's standard, that is how you should live and plan for it. Take away the term RETIREMENT and just consider it another phase of life. With any phase, there are always prerequisites to ensure you make it thru that phase as planned. How much to budget to bolster the status level you envisioned for you depends on you. Can you live on less than 500k for the rest of your life plus medical? Or you can only do so if you have a few million in your account? Are you someone used to living large above average and can not see yourself living on less? For me even if I have more money, there are only so many things or activities I can indulge in practically. Diet is key so comfort food is not healthy even if I can afford it, owning adult toys like an exotic car is not practical as it cost money even if you keep it in the garage as an investment. How active you want to be financial to invest your money?....etc I can name many things but alot has to do with who you are or would become in the decades to come since you only just got out of Uni. Guidelines you adopt will also evolve over time.

 

We all die alone. How you treat yourself and choose to live should suit you and not subjected to other's 'approval' or instruction. When you come to my age, 'how-lian' makes no sense also or do you think so? Who you want to impress? Make sense if it is a female as they are interested in your wallet more than what's in your pants long term. Old guy I am talking here not about young guys. But a gay guy? hehhehe... I think your handsome face, big dick might have a more of a draw than your wallet unless a money boy. At your age, you still need money boys?

 

Okay sound like all over the place, but what I am getting at from my view, it is hard to pin down any formula to use to help you plan for the future apart from some smart money management. But your life style and actions all play a big part in fitting into the time line. 

 

Pace your expectation and delay your rewards as long as you can or can justify it too soon. Many have gone into debt all because they want to enjoy first, and pay later. I have never seen happy endings for anyone going that route but the FEW very lucky ones. But being willing to ask these questions mean you are willing to take some control of it. Which is always a good start. Relook at those same question every 5 yrs is a good habit so you can course correct.

 

My view from good and bad mistakes I made the last few decades. Nothing more or less.

Edited March 20, 2021 by upshot

[silverguy]

Hi,

 

I have an outstanding housing loan and would like to get some perspective from fellow members/gurus here on my planned repayment strategy.

 

Current situation:

- Retiree without official income

- CPF OA account has been emptied to pay off part of the housing loan

- Have outstanding housing loan (let's say $1mil - actual amount is much lesser)

- If continue monthly repayment, the loan can be repaid in 20 years time

- Have sufficient funds to do a full redemption of the loan as well as retirement

 

Though I can do a full repayment of the loan, I am thinking of using it to buy an insurance endowment plan where if I put in a lump sum, after 5 years, the plan will give me a monthly payout which can match or more than cover the monthly loan repayment. I think this is a good strategy because: 

1) Via monthly loan repayment, it will only be repaid in another 20 years.  The insurance will give me a monthly payout (will start 5 years after the plan is bought)  for 20 years, meaning I will enjoy extra 5 years of payout even after the loan has been fully paid

2) At the end of 20 years payment by the endowment plan, it still has a lump sum value which can be added into my retirement funds

3) As I am a retiree and do not have any income, for whatever reason if I need any extra cash (which I hope it will never happen), I can still surrender the policy and get back some cash.  I think this is an easier option as compared to trying to get a loan from bank when I do not have an income to support my credentials 

4) In the event of death, the endowment plan also comes with additional 5% payout on top of the principal sum

 

Do you all think is a good strategy or there are some oversight on my part?

 

Appreciate your valuable inputs. 

 

PS: I have spoken to financial planners but as they hope I will buy the plan from them, as expected, they have said it is a good strategy. 

 

 

 

[InBangkok]

As one who is quite a few years over 50, I cannot imagine why anyone would wish to retire at that age. If you enjoy your work, as I have almost always, I don't want to give it up. Perhaps I am fortunate in that my job requires a lot of travel and I can still see lots of places I have wanted to visit at minimal cost to myself. Plus the air miles and hotel frequent stay benefits I can use for myself. My work also gives me a group of acquaintances in several parts of the world who have become good friends over the years. Although my bf cannot travel with me if I am on business, I rarely have to be alone.

 

Depending on your type of work, you could consider easing yourself into semi-retirement or become a freelance consultant. Whatever, you will need something to keep your mind active and engaged. The freedom of not having to work must sound great in your 20s and 30s, but if you are stuck at home just seeing friends and occasionally travelling, I am certain life could become horribly boring.

 

However, you can only consider retirement is you have the funds to finance it. Not just for a few years - for the rest of your life. That requires a good deal of thinking and planning. Today we have become used to a very long period of very low inflation. Think back to the UK in the 1970s, tho, when the average inflation rate for that decade was over 12% per annum. In 1975 alone it was 25%. Singapore has been lucky (prudent) because inflation has only risen by around 100% in the last 30 years. But these years have seen many with particularly low inflation. Can you predict the inflation rate over the next 40 or so years if you retire at 50? Then think about financial crises that can significantly impact the value of your savings. The 1997 Asian Economic crisis saw the value of almost all Asian currencies plummet and remain at a low level for a long time. The collapse of the dot.com bubble, the financial effects of SARS and the worldwide financial depression following 2008.

 

As long as you have worked out how you are going to finance your long retirement and still have a meaningful and enjoyable life, as long as you are either living in a country where your medical costs will mostly be covered by the state or you have a medical insurance policy to cover your long term needs, only then should you even think about possible early retirement. Lastly, if you do depend on a medical insurance policy, you have to be aware that the premiums will rise much faster after you reach 50 to 55. Medical insurance inflation has historically risen much faster than inflation generally, plus every five years you will see quite a large jump in the premium. 

[keyboard]

Personally don't believe in endowment plans. The company can close shop anytime and that is a risk I wouldn't like to take. Just look at how currently full riders have to pay 5% co-payment because the insurers are not making enough profits.

 

As for your question above, age is a very important factor. Upon reaching a certain age, your credit line basically becomes questionable. There are loopholes in the CPF scheme though the goal post would most likely move within 20 years.

 

Look at how govt policies are doing. They tend to be a sure-win situation to be not on the losing end. E.g. HDB loans, CPFlife, Medisave withdrawals etc.

 

The risks you have to consider are the options vs the timelines.

[keyboard]

Replying to TS original post.

 

I "did" kinda retire after getting twice retrenched in 2016? With 200k in bank and 100k in cpf. Retirement is really about how much you need to live on. It's easy to calculate how much you need, monthly expenses x 12 x number of years you want to retire. The excess is just hug with you and burn together in coffin. 86 is a good age, if you exceed 90 I think that's quite a safe bet. Plus, I'm a believer in asking govt for money or collecting cardboard as "exercise".

 

p.s. also into consideration is what industry you are in, their lifespan is pretty different

[InBangkok]

11 hours ago, silverguy said:

I am thinking of using it to buy an insurance endowment plan where if I put in a lump sum, after 5 years, the plan will give me a monthly payout which can match or more than cover the monthly loan repayment. I think this is a good strategy because: 

1) Via monthly loan repayment, it will only be repaid in another 20 years.  The insurance will give me a monthly payout (will start 5 years after the plan is bought)  for 20 years, meaning I will enjoy extra 5 years of payout even after the loan has been fully paid

2) At the end of 20 years payment by the endowment plan, it still has a lump sum value which can be added into my retirement funds

3) As I am a retiree and do not have any income, for whatever reason if I need any extra cash (which I hope it will never happen), I can still surrender the policy and get back some cash.  I think this is an easier option as compared to trying to get a loan from bank when I do not have an income to support my credentials 

4) In the event of death, the endowment plan also comes with additional 5% payout on top of the principal sum

 

Do you all think is a good strategy or there are some oversight on my part?

Please do lots of research! One key issue here is item 3. If you find you need cash and have to surrender the policy, how much will you actually get back? All insurance linked policies deduct an amount each year to cover the insurance element. So it is unlikely you will get even the full amount you have already paid in back. Many such policies also have a time-penalty built in which reduces the amount even more. After all, they do not want you to surrender the policy at all!

 

I have experience of long term life insurance endowment policies and also savings policies linked to insurance.  The former I took out just after leaving university as I had been told this was the ideal way to start long term financial planning for retirement. The second I very stupidly paid little attention to. The finance company had generated a good return for me on a very small investment. I decided to give them a larger amount on the basis that i would not need it for at least 30 years. But I stated very clearly it was for pension purposes and I was prepared to accept only a small amount of risk.

 

End result? The life assurance companies got so hammered by the various financial crises from the late 1990s to the end of the 2000s, they changed the goalposts relating to annual and redemption bonuses. By their own admission, once these reach maturity, I will get around 30% less than I was informed by them in writing 20 years ago! With the one-off pension deposit, I discovered after only 18 months that the value of the investment had dropped by about 35%. I was furious. I stormed into the MD's office and reminded him I had not wanted more than minimum risk. His reply. Oh, the fund we invested in was over-exposed in Japan. But it will all come back quite quickly and your pension contribution will still be very sizeable on maturity. When he told me they were still keeping some of that fund in Japan and I knew that the Japan stockmarket was still crashing, I immediately cut my losses and surrendered the policy. It was only then I realised that it had been put into an insurance-linked investment. As a result, I have never considered insurance-linked investment vehicles again. I should have down a lot more research.

Edited April 19, 2021 by InBangkok

[FIRE2020]

On 4/19/2021 at 2:41 AM, silverguy said:

Hi,

 

I have an outstanding housing loan and would like to get some perspective from fellow members/gurus here on my planned repayment strategy.

 

Current situation:

- Retiree without official income

- CPF OA account has been emptied to pay off part of the housing loan

- Have outstanding housing loan (let's say $1mil - actual amount is much lesser)

- If continue monthly repayment, the loan can be repaid in 20 years time

- Have sufficient funds to do a full redemption of the loan as well as retirement

 

Though I can do a full repayment of the loan, I am thinking of using it to buy an insurance endowment plan where if I put in a lump sum, after 5 years, the plan will give me a monthly payout which can match or more than cover the monthly loan repayment. I think this is a good strategy because: 

1) Via monthly loan repayment, it will only be repaid in another 20 years.  The insurance will give me a monthly payout (will start 5 years after the plan is bought)  for 20 years, meaning I will enjoy extra 5 years of payout even after the loan has been fully paid

2) At the end of 20 years payment by the endowment plan, it still has a lump sum value which can be added into my retirement funds

3) As I am a retiree and do not have any income, for whatever reason if I need any extra cash (which I hope it will never happen), I can still surrender the policy and get back some cash.  I think this is an easier option as compared to trying to get a loan from bank when I do not have an income to support my credentials 

4) In the event of death, the endowment plan also comes with additional 5% payout on top of the principal sum

 

Do you all think is a good strategy or there are some oversight on my part?

 

Appreciate your valuable inputs. 

 

PS: I have spoken to financial planners but as they hope I will buy the plan from them, as expected, they have said it is a good strategy. 

 

 

 

Retirement planning has always been in my mind, It becomes even more important 2 years ago since I bought a property and took up home loan with repayment period around 14 years due to age limitation.  With a shorter loan tenure, my monthly installment is quite a lot which makes me felt suddenly my disposable monthly income has gone down so much that I have to plan my spending which I never had to in the past.  It is possible to make the purchase without loan. However, I wanted to experience the ability use leverage to own a property before I no longer have the chance to do so coupled with interest rate being relatively low. I regretted for not making money via property investment using leverage earlier.

 

After 1 years of owning the property, I decided to refund my CPF used for the property purchases to enable my CPF to continue to grow for my retirement.  I did refinance recently to have interest rate lower further. Even with lower interest rate, I am always exploring ways to generate higher return that interest paid to the bank. 

 

Passive income is the KEY to retirement. I explored different avenue of generating it including endowment plan but came to the conclusion that I would not include it as part of my retirement plan. Because Endowment plan comes with guarantee and non guarantee portion of the return.  Assuming the worse case, the return of endowment plan would be no better than fixed deposit. Of course, the chance of hitting the promise return is there but not guarantee. I read a retirement book recently where the author shared the same view but after those financial crisis happened recently, he started to have second opinion of endowment plan. This triggers me re-think my initial decision. However, the conclusion is still no for me because I believe there is better return elsewhere with acceptable risk and provides good passive income. For those who is not too financial savvy, then endowment plan might be a safer route to retirement. 

 

Consider buying into those unit trust intended for paying regular income.  If you want lower risk goes for balance or multi asset fund, these funds their unit price is generally relative stable.  However, during crisis, the unit price would follow the market trends and dropped but it would rise up back to similar level in time to come. Example march 2020 correction and the pricing level is almost back to march 2020 level now. While riding these price movement, you get to receive monthly payout from the fund with you could re-invest or payout. 

 

The idea of balance fund is to have invest in  bond and equity in term achieve more price stability. you could choose fund focus in Asia, Global. Multi Asset fund works on the idea that having the fund invested in a spectrum of assets where some assets perform better than the others in certain market conditions which in whatever market conditions, the unit price of the fund would not swing too much and yet you receive payout and re-invest.  

 

If you want higher monthly payout and capital upside, you could consider Nikko Singapore equity fund where it pays out dividend monthly and higher than STI ETF. The advantage is that it payout monthly dividend whereas STI ETF payout semi-annually. Please note the unit price of this fund has returned to pre-covid 19 level. if you were to invested in it when it dipped in March 2020, you would be sitting on relatively nice return and also enjoy monthly payout of dividend. 

 

There is some believe in buying into individual Reit for passive income. I don't like such idea because you have to spend time researching them but the return is usually dividend yield of says 5% and not much upside of reit price usually. Hence, I prefer to buy Reit fund or ETF to generate passive income. Philip has both ETF and UT. I am vested in both. But I am more royal to UT Reit (hold long term) than reit ETF.

 

UT is an important component of my retirement planning for passive income. I am still exploring other ways to generate passive income beside UT.

 

Another important components of my retirement planning to develop short term trading skill to generate money return from the stock market after my retirement. I believe it is possible if one has interest in it and also it could be a very good hobby for brain to strategize the investment game plan. Like every skill, it takes thousand of hours to master a skill and be competent. However, there is some short cut if you found some guru in market where you could ride on with them either paying annual fee or open an account with them for daily updated market info. 

 

I told myself that my current job would be my last full time job regardless whether it ends earlier due to retrenchment or not. Otherwise I would continue to work till some reasons to make me decide to leave.

 

Once retired, I would spend more time to explore  places like Japan, Taiwan, India, Asean countries. Also Europe once in every few years. I would finance these holidays with my income generated from trading. It is important to train such mindset from now to program your brain to think this way. Hence, these days, whenever I wanted somethings quite expensive, I would focus on my trading to generate the profit before buying it.  Example, I bought a Brompton recently. Friends told me I am mad to spend nearly 3K for a bike. But they didn't know that it was financed by trading profit and not my salary. :):)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[keyboard]

For those who are considering housing as a form of income. Take note that along the 45-50 mark, the resale value drops in a linear pattern. Things like the lease buyback scheme pays around ~$500/mth of say a 4rm flat. Changing a big house to small house maybe unlock ~100k. So don't overly depend on housing as an asset.

[silverguy]

Thanks @InBangkok for your kind inputs.  Yes, I have done my research and the breakeven point is on the 5th year, which I am fine with it.

 

Thanks @FIRE2020.  I do share your views about investment being one of the strategies to generate passive income for retirement.  I pickup my investment/trading skills under Adam Khoo, which I find it to be suitable for my personality.  As for investment in REITS, it used to be one of my options for consideration.  However, since the pandemic, with many companies planning to allow their staff to work from home in the long run, I am still assessing the impact on the demand for commercial properties. 

 

So in summary on how I intend to manage my housing loan funds, it looks like apart from insurance plan I have in mind, another option will be to part the it  in a low risk and stable fund/ETF. 

 

Thanks again guys!